Handbook of High Frequency Trading - 1st Edition - ISBN: 9780128022054, 9780128023624

Handbook of High Frequency Trading

1st Edition

Editors: Greg N. Gregoriou
eBook ISBN: 9780128023624
Hardcover ISBN: 9780128022054
Imprint: Academic Press
Published Date: 4th February 2015
Page Count: 494
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Description

This comprehensive examination of high frequency trading looks beyond mathematical models, which are the subject of most HFT books, to the mechanics of the marketplace. In 25 chapters, researchers probe the intricate nature of high frequency market dynamics, market structure, back-office processes, and regulation. They look deeply into computing infrastructure, describing data sources, formats, and required processing rates as well as software architecture and current technologies. They also create contexts, explaining the historical rise of automated trading systems, corresponding technological advances in hardware and software, and the evolution of the trading landscape. Developed for students and professionals who want more than discussions on the econometrics of the modelling process, The Handbook of High Frequency Trading explains the entirety of this controversial trading strategy.

Key Features

  • Answers all questions about high frequency trading without being limited to mathematical modelling
  • Illuminates market dynamics, processes, and regulations
  • Explains how high frequency trading evolved and predicts its future developments

Readership

Upper-division undergraduates, graduate students, and professionals working in asset pricing, investments, and financial institutions.

Table of Contents

  • List of Contributors
  • Contributors Biographies
  • Editor Biography
  • Acknowledgments
  • Introduction
  • Part 1. Trading Activity
    • Chapter 1. High-Frequency Activity on NASDAQ
      • 1.1. Introduction
      • 1.2. Data
      • 1.3. Results
      • 1.4. Conclusion
    • Chapter 2. The Profitability of High-Frequency Trading: Is It for Real?
      • 2.1. Introduction
      • 2.2. Definition and Characteristics of HFT
      • 2.3. What Constitutes HFT?
      • 2.4. The Profitability of HFT
      • 2.5. Profitability as a Function of the Holding Period
      • 2.6. Methodology
      • 2.7. Data and Empirical Results
      • 2.8. Conclusion
    • Chapter 3. Data Characteristics for High-Frequency Trading Systems
      • 3.1. Introduction
      • 3.2. Literature Review
      • 3.3. Methodology
      • 3.4. Analysis of Data
      • 3.5. Conclusion
    • Chapter 4. The Relevance of Heteroskedasticity and Structural Breaks when Testing for a Random Walk with High-Frequency Financial Data: Evidence from ASEAN Stock Markets
      • 4.1. Introduction
      • 4.2. Method
      • 4.3. Data
      • 4.4. Results
      • 4.5. Discussion
      • 4.6. Conclusion
    • Chapter 5. Game Theoretical Aspects of Colocation in High-Speed Financial Markets
      • 5.1. Introduction
      • 5.2. Literature and Structure of the Chapter
      • 5.3. Colocation and Latency Reduction
      • 5.4. Empirical Evidence: Technical Arbitrage through Latency Reduction
      • 5.5. Modeling Strategic Choices on Colocation
      • 5.6. Discussion: Evolutionary Optimization and Spatial Dynamics
      • 5.7. Conclusion, Limitations, and Implications for Money Managers
    • Chapter 6. Describing and Regulating High-Frequency Trading: A European Perspective
      • 6.1. Introduction
      • 6.2. HFT Description and Drivers
      • 6.3. High Frequency Trading versus Algorithmic Trading
      • 6.4. Strategies of HFT
      • 6.5. Characteristics of AT and HFT
      • 6.6. About the Concept of Liquidity
      • 6.7. HFT and Flash Crashes
      • 6.8. MiFID II and HFT Regulation in the EU
  • Part 2. Evolution and the Future
    • Chapter 7. High-Frequency Trading: Implications for Market Efficiency and Fairness
      • 7.1. Introduction
      • 7.2. Nature of HFT and Recent Trends
      • 7.3. Some Salient Issues Related to HFT
      • 7.4. HFT and “Fairness”
      • 7.5. Concluding Remarks
    • Chapter 8. Revisioning Revisionism: A Glance at HFT's Critics
      • 8.1. Introduction: High-Frequency Trading Under Siege
      • 8.2. The Lewis Debate in Context
      • 8.3. An HFT Tableau: Perception versus Reality
      • 8.4. Conclusion
    • Chapter 9. High-Frequency Trading: Past, Present, and Future
      • 9.1. Introduction
      • 9.2. The Origins of HFT
      • 9.3. HFT Today
      • 9.4. HFT Going Forward
      • 9.5. Hedge Funds
      • 9.6. Conclusion
    • Chapter 10. High-Frequency Trading and Its Regulation in the Australian Equity Markets
      • 10.1. Introduction
      • 10.2. Regulatory Response
      • 10.3. Conclusion
    • Chapter 11. Global Exchanges in the HFT Nexus
      • 11.1. Introduction
      • 11.2. The Nexus of an Exchange
      • 11.3. Exchanges and Their Customers
      • 11.4. Regulators and Exchanges
      • 11.5. Conclusion
  • Part 3. Liquidity and Execution
    • Chapter 12. Liquidity: Systematic Liquidity, Commonality, and High-Frequency Trading
      • 12.1. Introduction
      • 12.2. High-Frequency Trading and Liquidity
      • 12.3. An Empirical Study of Equity Market Liquidity
      • 12.4. Data
      • 12.5. Statistical Results
      • 12.6. Concluding Thoughts
    • Chapter 13. We Missed It Again! Why Do So Many Market Orders in High-Frequency FX Trading Fail to be Executed?
      • 13.1. Introduction
      • 13.2. The Structure of the EBS FX Market
      • 13.3. Aggressive IOC Orders
      • 13.4. Conclusion
    • Chapter 14. Efficient Performance Evaluation for High-Frequency Traders
      • 14.1. Introduction
      • 14.2. The Model
      • 14.3. Conclusion
  • Part 4. Impact of News Releases
    • Chapter 15. Do High Frequency Traders Care about Earnings Announcements? An Analysis of Trading Activity before, during, and after Regular Trading Hours
      • 15.1. Introduction
      • 15.2. High Frequency Trading
      • 15.3. Related Literature
      • 15.4. Data
      • 15.5. Results
      • 15.6. Conclusion
    • Chapter 16. Why Accountants Should Care about High Frequency Trading
      • 16.1. Introduction
      • 16.2. Internal controls and tone at the top
      • 16.3. Conclusion
    • Chapter 17. High-Frequency Trading under Information Regimes
      • 17.1. Introduction
      • 17.2. Data
      • 17.3. Methodology and Results
      • 17.4. High-Frequency Trading Strategies
      • 17.5. Conclusion
    • Chapter 18. Effects of Firm-Specific Public Announcements on Market Dynamics: Implications for High-Frequency Traders
      • 18.1. Introduction
      • 18.2. Data and Methodology
      • 18.3. Empirical Results
      • 18.4. Implications for HFT
      • 18.5. Conclusion
    • Chapter 19. Machine News and Volatility: The Dow Jones Industrial Average and the TRNA Real-Time High-Frequency Sentiment Series
      • 19.1. Introduction
      • 19.2. Research Methods and Data
      • 19.3. The Significance of the Sentiment Scores in the GARCH Analysis of DJIA Return Series
      • 19.4. Conclusion
  • Part 5. Impact of Volatility
    • Chapter 20. High-Frequency Technical Trading: Insights for Practitioners
      • 20.1. Introduction
      • 20.2. The Trading Rule Methodology
      • 20.3. Data
      • 20.4. Results
      • 20.5. Conclusion
    • Chapter 21. High-Frequency News Flow and States of Asset Volatility
      • 21.1. Introduction
      • 21.2. Data and Sample
      • 21.3. Data and Sample
      • 21.4. Methodology and Model Specification
      • 21.5. Empirical Results and Implications
      • 21.6. Conclusion and Implications
      • Appendix A: Dow Jones Composite Average 65 Stocks
      • Appendix B: RavenPack Algorithms
    • Chapter 22. News Releases and Stock Market Volatility: Intraday Evidence from Borsa Istanbul
      • 22.1. Introduction
      • 22.2. Model Specification and Data
      • 22.3. Results and Discussion
      • 22.3. Conclusion
    • Chapter 23. The Low-Risk Anomaly Revisited on High-Frequency Data
      • 23.1. Introduction
      • 23.2. Literature Review
      • 23.3. Methodology
      • 23.4. Investment Universe and Data Collection
      • 23.5. Findings
      • 23.6. Conclusion
      • Appendix 1
      • Appendix 2
    • Chapter 24. Measuring the Leverage Effect in a High-Frequency Trading Framework
      • 24.1. Introduction
      • 24.2. Model Setting
      • 24.3. Computation of Leverage Using Fourier Methodology
      • 24.4. Numerical Results
      • 24.5. Conclusion
  • Index

Details

No. of pages:
494
Language:
English
Copyright:
© Academic Press 2015
Published:
Imprint:
Academic Press
eBook ISBN:
9780128023624
Hardcover ISBN:
9780128022054

About the Editor

Greg N. Gregoriou

Greg N. Gregoriou

A native of Montreal, Professor Greg N. Gregoriou obtained his joint Ph.D. in finance at the University of Quebec at Montreal which merges the resources of Montreal's four major universities McGill, Concordia, UQAM and HEC. Professor Gregoriou is Professor of Finance at State University of New York (Plattsburgh) and has taught a variety of finance courses such as Alternative Investments, International Finance, Money and Capital Markets, Portfolio Management, and Corporate Finance. He has also lectured at the University of Vermont, Universidad de Navarra and at the University of Quebec at Montreal.

Professor Gregoriou has published 50 books, 65 refereed publications in peer-reviewed journals and 24 book chapters since his arrival at SUNY Plattsburgh in August 2003. Professor Gregoriou's books have been published by McGraw-Hill, John Wiley & Sons, Elsevier-Butterworth/Heinemann, Taylor and Francis/CRC Press, Palgrave-MacMillan and Risk Books. Four of his books have been translated into Chinese and Russian. His academic articles have appeared in well-known peer-reviewed journals such as the Review of Asset Pricing Studies, Journal of Portfolio Management, Journal of Futures Markets, European Journal of Operational Research, Annals of Operations Research, Computers and Operations Research, etc.

Professor Gregoriou is the derivatives editor and editorial board member for the Journal of Asset Management as well as editorial board member for the Journal of Wealth Management, the Journal of Risk Management in Financial Institutions, Market Integrity, IEB International Journal of Finance, and the Brazilian Business Review. Professor Gregoriou's interests focus on hedge funds, funds of funds, commodity trading advisors, managed futures, venture capital and private equity. He has also been quoted several times in the New York Times, Barron's, the Financial Times of London, Le Temps (Geneva), Les Echos (Paris) and L'Observateur de Monaco. He has done consulting work for numerous clients and investment firms in Montreal. He is a part-time lecturer in finance at McGill University, an advisory member of the Markets and Services Research Centre at Edith Cowan University in Joondalup (Australia), a senior advisor to the Ferrell Asset Management Group in Singapore and a research associate with the University of Quebec at Montreal's CDP Capital Chair in Portfolio Management. He is on the advisory board of the Research Center for Operations and Productivity Management at the University of Science and Technology (Management School) in Hefei, Anhui, China.

Affiliations and Expertise

School of Business and Economics, State University of New York, Plattsburgh, NY, USA

Reviews

"This handbook, expertly edited by Professor Gregoriou, provides a very thorough coverage of what is a new and complex field of study.  It will be indispensable for both commercial and scholastic researchers." --Stephen Satchell, University of Sydney

"The introduction of high frequency trading is a major change in the way securities are traded. As with all major changes in security markets there are questions of liquidity and execution, informational efficiency, and the possibility of excess volatility and systemic risk. All of these concerns come down to the fundamental question of how fair these markets are. This volume represents the first comprehensive study of these issues from an academic point of view." --Stephen J. Brown, NYU Stern School of Business